Fake doctor, fake drugs
Asia & Australia,  Technology

Blockchain may offer solution to deadly distribution of fake pharmaceuticals

Fraudulent and substandard drugs kill hundreds of thousands of children every year in developing countries

On Jan. 31, China’s Chongqing Yuzhong District Food and Drug Administration announced that it was partnering with a local blockchain firm, Prime Chain Network, to combat fake and expired prescription drugs.

Fraud in the pharmaceutical manufacturing industry is a huge issue in China, where product safety issues have long been a severe problem—in 2008, melamine-laced infant powdered milk was one of several scandals that damaged the “Made in China” brand.

Fake medications also have an impact on the financial health of the broader drug market, said the South China Morning News in July 2018. An incident involving a quarter million substandard doses of diphtheria, tetanus, and whooping cough vaccines caused the Health Care Index, which tracks the performance of 22 pharmaceutical stocks on the CSI 300 Index, to lose more than 4 percent in a single day.

Which isn’t to say it’s not a big problem in developed countries like the U.S., as well as the EU. The World Health Organization says bogus meds are a $200 billion business, after all.

One of the big drivers of blockchain’s entrance into the pharmaceutical industry is the U.S. Drug Supply Chain Security Act (DSCSA), which comes into force in stages through 2023. The act essentially requires firms to be able to track and trace drugs throughout the supply chain electronically, from the raw materials to the manufacturing stage, and through the supply chain to the consumer. Enterprise blockchain solutions are among the fastest and most transparent ways to do that.

While many of the fraudulent Chinese drugs are lifestyle drugs like Viagra, the knock-off market has been moving to medications for life-threatening illnesses like malaria, tuberculosis, and even HIV/AIDS according to PricewaterhouseCoopers.

This is particularly threatening for developing countries—especially the poorest in regions like West Africa. The World Health Organization estimates that fully 10 percent of the medical products in developing countries are either fake or substandard in a Nov. 2017 report.

The scale of harm caused is frightening, and the impact falls most heavily on the weakest: children. Based on that 10 percent estimate, the WHO cited a report from the University of Edinburgh calculated that as many as 169,000 children die of pneumonia every year, The UN agency cited another study from the London School of Economics that approximated 116,000 children die of malaria each year. In a 2017 report, PricewaterhouseCoopers cited research putting the latter number three times as high.

The profits are enormous. The U.S. National Institutes of Health cites one expert who reckoned that a $1,000 investment in fake drugs can return $30,000—more than 10 times the profit in heroin.

Blockchain offers a solution

By providing a public and immutable record of every step in the supply chain, enterprise blockchain offers a powerful tool for combating this fraud. Data stored on the blockchain makes it possible to trace every drug all the way back to its raw materials. Each step in the supply chain can be searched virtually instantaneously, so problems can quickly be traced to their point of origin

IBM Blockchain is working with SAP to track not just the origin of drugs but also “cold-chain” data to determine whether temperature-sensitive pharmaceuticals have had appropriate cooling throughout the transportation process. Because blockchain data is shared instantly, it allows on-the-fly corrections before they become serious enough to taint the shipment.

There are plenty of big pharma firms turning to enterprise blockchain technology providers to track pharmaceuticals through this supply chain. One is Chronicled, a blockchain firm that has teamed with life science supply chain consultant LinkLab to create MediLedger, which is working with a number of large pharma companies including Pfizer and Genentech. Other blockchain companies in the space include Cryptowerk, FarmaTrust, Spiritus.

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.